Amsterdam's Zuidas project faces financing crisis

Amsterdam's ambitious plan to redevelop the Zuidas business district in the south of the Dutch capital faces a serious crisis after private investors rejected the investment proposal put forward by the city council.

The eight key investors believe the financial and political risks associated with the Zuidas project are too big and they accuse city officials of wanting to have a say on all the details while making others shoulder the financial burden, according to a report in Dutch financial newspaper Het Financieele Dagblad. In a confidential letter to banks and pension funds, the municipality said it recognised the current plan 'is not attractive enough' for the private parties, the newspaper reported.

The Zuidas is the largest and most ambitious real estate project in the Netherlands designed to make Amsterdam more competitive internationally. The start of the project that would see the municipality and private parties jointly developing the Zuidas has already been delayed several times because of the different views the public and private parties have on the project. The EUR 4bn development involves moving the entire infrastructure - including the highway and train lines - to an underground tunnel to make space for 2.7 million m² of houses, offices and services at ground level. The works is to be carried out by the new dedicated Zuidas company, which is controlled 20% by the Amsterdam city council, 20% by the Dutch government and the rest by private parties.

The financiers that are pulling out of the project are ABN Amro Bank, municipal bank BNG, Fortis Bank, HBOS (Halifax Bank of Scotland), ING Real Estate, Schiphol Group, Rabobank and Amsterdam's Schiphol Airport and civil service pension fund ABP.

Dutch finance minister Wouter Bos has reportedly hired investment bank Credit Suisse First Boston (CSFB) to investigate as soon as possible whether the private parties' interest in the project could be revived. CSFB started two weeks ago with the enquiry and should give its advice within one month, in time for a key municipality meeting scheduled for 4 June.